Hi Jim,
Been out camping and just saw your post. You had a couple questions but this comes back to, does your water heater "work" on electric? Just maybe it does actually heat, just no red light. Please clarify.
A few things to help explain some differences of old and new. During the late 2003 and early 2004 model Sunlines, the Atwood water heater went though an upgrade. Your 2007 will have the newer upgrades.
There is no electric element On/Off switch on the back of your 2007 unit like the older pre upgraded ones. The upgrade now uses a power relay that is turned on and off by the KIB tank panel. The relay is part of the Atwood heater. See here and this is also where your electric element is.
In this pic there is a black plastic box at about the center of the back rear of the water heater.
And inside that black box is the relay and the electric element.
You can test the element their "power must be off". Both 12 VDC and 120 VAC.
Now to the little red rocker switch light that does not seem to want to turn on. This is all up in the KIB tank panel. Your 2007 vintage has 3 red switches. These pics are of my older 2 switch one in my T310SR but my point will be the same.
That red rocker "switch" will if it is working will send 12 VDC down to the Atwood power relay to turn the relay on. If the 120 VAC circuit breaker in the power converter box is on, then 120 VAC will flow to the electric element through the relay assuming the element is not burned out.
The red light inside the red switch is just an indicator light. It only gets it's 12 VDC power from the rocker switch. When the switch is on, the light turns on etc. There is no feedback that the actual Atwood electric element is doing anything. In fact, if you forget to turn the circuit breaker on, the red light when working will come on and there is no 120 VAC power going to the electric element.
Your thought of a loose wire on the red light is a very good possibility or it is burnt out. Try this if you want to go hunting.
The KIB panel cover comes off with a flick of a screwdriver in the "right" place. Insert and twist to gently pry it open. Look for the "tab" on where to place the screw driver.
Once the panel cover is off it looks like this, just yours is wider.
The red PC board connection pushes on and off the PC board and the wires are pressed in and slit and make contact. See if any are loose.
Next is to take the whole white tank panel off the wall. There is a "lot" of wires stuffed in the wall with wire nuts on them.
I do not have a pic of the back side of the rocker switches however look and you will see wires for the switch part of the rocker and wires for the light inside the rocker. My memory recalls a jumper wire from the downstream side of the rocker switch powers in the red light inside. You can see if that wire is loose or even test the light with 12 VDC power to see if it is burnt out. Also check the 12 volt ground wire (-12 VDC) as the issue could be on the ground side and not the hot side.
See if that helps. I have pics "somewhere".... of a 3 switch KIB panel from my prior T2499 but I cannot find them right now. If you get stuck, let me know and I will go take some pics on the my 1950 or the 2475 which should have the 3 switch panel and we can go from there.
Hope this helps and let us know how you make out.
John